The Obama administration has been rebuffed at the first hearing of a landmark case into the constitutionality of the mass collection of telephone data.

Justice Department lawyers argued for the case to be delayed because the intelligence community is busily working through classified material related to surveillance to see what can be made public. Some of that declassified material could be pertinent to the case, but it is a time-consuming effort, they said.

But at the US district court in New York, judge William Pauley dismissed the request and set a schedule, with motions to be filed by 26 August and oral arguments to begin on 1 November.

The 40-minute hearing in courtroom 20B could be the start of a long process that could go all the way to the supreme court unless the NSA abandons major parts of its surveillance programme or Congress changes the law.

The American Civil Liberties Union filed the lawsuit five days after the Guardian revealed the NSA is engaged in the mass collection of US phone records.

Jameel Jaffer, representing the ACLU, said: "We are arguing that the programme is not authorised by statute and, even if it was, it is unconstitutional."

He welcomed the judge's decision to set a schedule in spite of government calls for delay. "I think it was a strategy on their party to delay court adjudication on this issue. The court saw through that," Jaffer said.

The Obama administration, in an effort to quell concern about intrusion into privacy, said it would review classified material related to the surveillance programme to see how much could be made public.

Tara La Morte, representing the government, said there was no need for a speedy schedule because the government was engaged in this declassification programme, with as much to be made public as was consistent with national security.

Jaffer responded that the government could declassify material quickly when it wanted, releasing material two days after the initial Guardian article.

The ACLU is seeking an injunction to stop Verizon Business Network Services, of which the ACLU is a customer, from handing over its phone records. Such collection of records allowed the government to learn sensitive and privileged information about the ACLU's work and "is likely to have a chilling effect on whistleblowers and others", the ACLU said in a submission to the court. The Justice Department, in a paper presented to the court, said the surveillance "has contributed to the disruption of multiple potential terrorist attacks in the United States and abroad".